Russia's state uranium firm ARMZ has offered to take Canada's Uranium One Inc. private in a $1.3-billion deal, but it may get the cold shoulder from shareholders holding out for years for a rebound in the embattled industry that could be just around the corner.
Minority shareholders are being offered $2.86 per share in the transaction that must be approved by holders of two-thirds of the company's stock.
Uranium One said on Monday it agreed to the deal with JSC Atomredmetzoloto and affiliate Effective Energy NV – which own 51.4 per cent of the company and are known together as ARMZ.
The offer is 19-per-cent higher than the close on Friday at $2.41 a share, and 60-per-cent higher than where the stock was trading in early December.
Even so, the offer values Uranium One shares at less than half the $6.79 per share level hit in 2011, just before the industry was sent into a tailspin after an earthquake and tsunami in Japan. The disaster fanned investor distrust for nuclear power, driving down prices for uranium and the companies that produce it.
Japan is looking again to re-start idled reactors, and experts are signalling a gradual revival for uranium prices, supported also by an end this year to an agreement that saw Russia supplying the United States with recycled weapons-grade uranium.
"In our opinion, the timing of the ARMZ offer is interesting as we believe the uranium market will perform very well after the expiry of the HEU (highly-enriched uranium) accord at the end of 2013," Adam Schatzker, an analyst with RBC Dominion Securities, wrote in a report. "The spot price is currently very close to seven-year lows and we think there is significant upside potential for Uranium One's shares in the next 18 to 24 months," he said. "Given the outlook for the uranium market and the price being offered for the minority shares, we think many shareholders will contemplate asking for a higher price from ARMZ."
The board of Uranium One, Canada's second-largest uranium producer, has approved by the transaction, which values the firm at $2.8-billion. Uranium One's operations are concentrated in Kazakhstan, where ARMZ is expanding its presence.
"We recommend that shareholders vote in favour of the Plan of Arrangement at the special meeting of shareholders that will be called to approve the transaction," said Ken Williamson, chairman of an independent committee of Uranium One formed to evaluate the proposal. "This proposal represents a significant premium to the 20-day volume-weighted average price of the Common Shares prior to today's announcement."
The offer is subject to a vote by shareholders at a special meeting in March and is subject to approval by a majority of votes cast by minority shareholders, as well as approval by two-thirds of the votes cast by all common shareholders, including ARMZ.
Desjardins Securities analyst John Hughes said in a note Monday the offer is insufficient. He described the offer as opportunistic and well below his target valuation of $3.75 per share. "We recommend minority shareholders reject the $2.86 [a] share offer at the upcoming special meeting and pursue a 10-20 per cent 'sweetener' to provide a value for Uranium One common shares closer to the higher end of the valuation range and the longer-term value of the company's producing and development assets," Mr. Hughes said.
Editor's note: The per-share offer by Russia's state uranium firm ARMZ is 19 per cent higher than Uranium One's stock close on Friday of $2.41. Incorrect information appeared in an earlier online version of this story.